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With El-Rufai’s report, fresh controversy trails oil revenue

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Kaduna State governor Nasir El-Rufai

By exhuming the ‘politically buried’ onshore/offshore dichotomy debate, the ruling All Progressives Congress (APC) has started another round of controversy over territorial limitation of oil wealth control between the Federal Government and littoral oil-producing states.

A committee set up by the ruling party, apparently to douse the tension raised by strident agitation for restructuring of the Nigerian federation along the line of true federalism, attempted in its report to address the three issues of fiscal federalism, devolution of power and resource control that are central to the agitation.

In the report, the committee headed by Kaduna State governor, Ahmed El-Rufai, recommended far-reaching resolutions to some of the vexed issues and suggested that mines and minerals, including oil fields and mining should be moved to the Concurrent Legislative List to be under dual control and supervision of both the federal and state authorities.

The committee however went beyond this step, which was in line with the principle of devolution of power as recommended by the unimplemented 2014 National Conference reports, to differentiate between onshore and offshore oil revenue control with the proposal that the latter should not be within the ambit of the federating units.

According to El-Rufai while presenting the report at the Abuja National Secretariat of the APC, “The fifth item is mines and minerals, including oil fields, oil mining, geological and natural gas. This should be moved to the Concurrent List. However, all offshore oil shall remain absolutely vested in the government of the federation.”

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Location of oil wells and their contributions to the national purse are the determining factors in monetary accruals to oil-producing states from the statutory Oil Mineral Derivation Fund under which 13 percent of oil revenue from each state is remitted to it on a monthly basis.

The 1999 Constitution stated that on the management of revenue allocation, “the principles of derivation shall be constantly reflected in any approved formula as being not less than thirteen percent of the revenue accruing to the Federation Account directly from any natural resources.”

While the same constitution described the territory of Nigeria as covering the thirty-six states of the federation and Abuja, the Federal Capital Territory, the excising of an exclusive economic zone to be administered by the Federal Government came in 1970 when with Decree 113, the revenue accruable to states was reduced from 50 percent to 45 percent and offshore oil was regarded, unlike before, as belonging exclusively to the federation.

That marked the commencement of the politics of derivation that continually went down under successive administrations as political power got more concentrated in the central government to the detriment of the principle of true federalism such that by 1977 under Olusegun Obasanjo’s dictatorship, derivation was reduced to 25 percent and was further plummeted to five percent during the civilian regime of Shehu Shagari.

By 1984, the derivation formula was further cut to 1.5 percent under Muhammadu Buhari and was finally reduced to one percent by the regime of Ibrahim Babangida even though the military president established the defunct Oil Minerals-Producing Areas Development Commission (OMPADEC), which was being funded with three percent oil revenue thereby raising funding access of oil-bearing states to four percent.

Babangida also went further by attempting to once and for all, settle the onshore/offshore dichotomy issue with Decree 106 of 1992, which stated that “an amount equivalent to one per cent of the Federation Account derived from mineral revenue shall be shared among the mineral producing states based on the amount of mineral produced from each state and in the application of this provision, the Dichotomy of Onshore/Offshore oil producing and mineral oil and non-mineral oil revenue is hereby abolished,” even though the decree was not gazetted before the regime was consumed by self-inflicted political crisis that emanated from the June 12, 1993 election annulment.

Although the 13 percent derivation formula was enshrined in the 1999 Constitution, an aspect that the new Obasanjo civilian regime did not respect for more than one year after inauguration, the dichotomy issue was again brought to the fore of national discourse with agitations by oil states which not only insisted on being paid according to constitutional provision but also called for the abrogation of the dichotomy.

However, because a whopping 40 percent of Nigeria’s oil wells are located offshore, the Federal Government was reluctant to abrogate the dichotomy and with the support of 19 Northern and three Southwestern states, sought the interpretation of the Supreme Court.

The Court held that “the seaward boundary of a littoral state within the Federal Republic of Nigeria, for the purpose of calculating the amount of revenue accruing to the Federation Account directly from any natural resources derived from that state pursuant to section 162(2) of the Constitution of the Federal Republic of Nigeria 1999, is the low water mark of the land surface thereof or (if the case so requires as in the Cross River State with an archipelago of islands) the seaward limits of inland waters within the state.”

At the heart of the matter was the proper description of the seaward territory of Nigeria, which according to the apex court, extended beyond the boundaries of the littoral states that have no authority over international waters.

With a judgment that was obviously going to economically strangulate some oil states and the fear of a backlash on the country’s economy and politics, a political solution in favour of the states was proffered by the National Assembly through a 2004 Act which provided that the derivation principle of the 1999 Constitution should be extended to within 200 meters (water depth isobaths) for littoral states.

Since that time, even though the states have been complaining that the process of determining the actual accruals have not been transparent enough, the vexed issue of dichotomy was allowed to rest until the El-Rufai committee brought it up again.

As expected, the committee’s proposal is being challenged by many Nigerians who claimed that because the APC was not ready to go along with restructuring which it clearly stated in its manifestoes, the party had to resurrect the dichotomy controversy to create diversion and division among the states of the federation, many of which are averse to more funding for oil states.

Describing the APC as playing the game of a presidency that merely wanted to pull the wool over the eyes of Nigerians on restructuring, a group of leaders from Akwa-Ibom State warned against reintroduction of the onshore/offshore dichotomy, saying it could lead to disintegration of Nigeria.

The Akwa-Ibom Leaders Vanguard, speaking through former Publicity Secretary of the Peoples Democratic Party (PDP), Senator Anietie Okon, said the El-Rufai committee was bringing back the dichotomy issue to cause confusion in the polity.

According to the group in a statement, “This exemplifies the height of dishonesty and an attempt to pull the wool over our eyes. It is frightening that chieftains of the party in the South-South are dangerously quiet over this calculated attempt to subtly reproduce through back door, the vexed onshore/offshore oil dichotomy that has long been settled in Nigeria.

“Fundamental among the recommendations of the APC Restructuring Committee is the swathed recommendation on resource control. Regrettably, the party’s position on resource control clearly prognosticates an irredeemable disaster for Nigeria.

“Nigeria is at the threshold of history that will make or mar her as a nation. We are saying no to illegal reintroduction of a settled matter of onshore/offshore dichotomy. It is an expensive joke taken too far. Nigeria might not survive this one. Our patience has been stressed to its elastic limits.”

Speaking in the same vein at a forum in Ibadan, former Ondo State governor, Dr. Olusegun Mimiko said the APC committee report on restructuring “will reignite the already settled controversial onshore/offshore dichotomy in oil production revenue.”

Mimiko, a PDP chieftain said although the report seemingly endorsed the resource control agitation, it brought back the sensitive and controversial dichotomy issue describing it as an attempt by the APC to hoodwink Nigerians.

However, while opposition to the issue is mainly emanating from the PDP camp, mum or tacit support has been the response from the APC giving the whole controversy some colouration of politics.

Although the APC in Akwa-Ibom requested that the dichotomy should not be brought back, it put the blame on “the PDP-sponsored” agitations for true federalism saying “the state had boxed itself into a corner by joining to seek true federalism which invariably means that only resources onshore would belong to the state while those offshore belong the Federal Government.”

In a statement, APC Chairman in the state, Dr. Amadu Atai said, “The onshore/offshore issue that came up that time was not settled; it was only a political solution. But if you want to replay back on true federalism you will lose that. True federalism means the resources of that state belongs to that state. Offshore oil belongs to the federal.

“So we are in a fix now. We the APC that supported true federalism did not know that it was coming to affect Akwa Ibom State. So we are going to present a paper to them (national leadership of the party) on this matter that they should allow what was done to remain. They should allow the political solution to remain while going ahead with the true federalism.”

And in Ondo, another state that has almost all its wells, like Akwa-Ibom, located offshore, the APC state government, apparently because it didn’t want to be seen confronting the leadership of the party, has not said anything about the development even when it is clear that by the position of El-Rufai’s committee report, the state would lose a substantial part of its oil derivation fund to the federation.


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